Hsu Linked to Past Clinton Scandal Donor

(CNSNews.com) - Norman Hsu's donations to Hillary Clinton's presidential campaign have brought comparisons but no direct connections to the 1990s "Chinagate" scandal.

But before Hsu made headlines as a fugitive fundraiser late last month (he's now in custody in California for a 1991 grand theft conviction), he served on a board with another key figure in the earlier fundraising scandal.

For more than a year, Hsu was a member of the board for the New School University in New York, where he worked with Bernard L. Schwartz. The latter, a major Clinton donor, was chief executive officer of a major defense contractor involved in technology transfers to the People's Republic of China, according to a congressional report released in 1999.

Hsu was named to the New School's board of governors in May 2006, New School spokesman Brian Krapf told Cybercast News Service. He was named to the board of trustees in July 2007.

Schwartz has served on the board of trustees since October 2004, according to a press release from the New School.

Schwartz, former chief of Loral Space and Communications, was very close to both Bill and Hillary Clinton, spent his 71st birthday with them in the White House in 1997, and is credited with giving $1.5 million to Democrats during the Clinton years, according to news reports. He reportedly has given $256,000 to the Democratic Party since 2004.

According to the congressional report, Loral and Hughes Electronics, another defense firm, provided Chinese space engineers with technical rocketry data that could assist the communist country's weapons programs. The firms allegedly pushed to get export licensing authority transferred from the U.S. State Department to the U.S. Department of Commerce, thus making it easier to transfer U.S. missile and satellite technology to the Chinese.

The congressional report also said Chinese Col. Liu Chaoying helped to funnel $300,000 to Johnny Chung, a key figure in the 1996 Clinton fundraising scandal. "Col. Liu's payment to Johnny Chung was an attempt to better position her in the United States to acquire computer, missile and satellite technologies," according to the report.

"Schwartz did business with communist China, so any connection Hsu has with him is intriguing," Judicial Watch President Tom Fitton told Cybercast News Service. "The Chinese government obtained many benefits from their access to U.S. technology."

In a 1998 news release after the scandal made headlines, Loral officials stated, "No sensitive information -- no significant technology -- was conveyed to the Chinese. No 'secret' or 'classified' information was ever discussed with the Chinese."

The statement further said that Bernard Schwartz "was not personally involved in any aspect of this matter. No political favors or benefits of any kind were requested or extended."

By 2003, both Loral and Hughes agreed to pay a combined fine of $32 million to the federal government for passing missile technology to the Chinese.

Schwartz retired as CEO of Loral in 2006, and now heads his own investment firm, BLS Investments.

Good article, thanks. Not really heaping a lot of praise on Schwartz, more like a couple of lines explaining what his strategy of roll-ups was, which started taking shape in 1970's, and which he and Lanza followed it in building L-3.

Roll-ups are simply acquisitions of competitors in a given industry, which lead to industry consolidation and result in higher prices due to lack of competition. Unfortunately, consolidation of defense industry was sharpest in 1990's when Clinton allowed several mergers and buyouts which reduced number of defense suppliers and defense contractor companies to just a few.

Interestingly, Schwartz really failed in his acquisition roll-up strategy to build Loral because eventually high debt forced him to disinvest almost all divisions / units, practically everything except Loral Space & Communications, to Lockheed-Martin in 1996. Lanza and LaPenta, who worked for Schwartz in Loral for almost 24 years, from 1972 to 1996 when he was forced to sell to Lockheed, went to Lockheed as part of acquisition. Just one year later, in 1997, Lanza convinced Lockheed to spin off L-3 formed from 10 former Loral subsidiaries, and then a year later, in 1998, L-3 went public and raised a lot of money in successful IPO. Scwartz was a WS VC banker, Lanza ("tech guy") and LaPenta ("finance guy") were more successful because they knew the industry and were more selective in their deals, but implemented essentially the same roll-up strategy with L-3 as Schwartz did with Loral.

Loral Corporation was an assemblage of defense units acquired from Fairchild, Ford, IBM, Unisys, and others between the mid-1970s and mid-1990s by Wall Street investor Bernard L. Schwartz. In April 1996, Lockheed Martin acquired most of these businesses for $9.1 billion. Two Loral executives, COO Frank Lanza and comptroller Robert LaPenta, joined Lockheed Martin as executive vice-president and vice-president, respectively. Loral's space businesses formed a separate firm, Loral Space & Communications Ltd., run by Schwartz.

Lanza, described by the Washington Post as "a taciturn New Yorker admired for his creativity and engineering genius," reportedly felt stifled by the bureaucratic corporate atmosphere at Lockheed Martin. An electrical engineer by training, Lanza had joined Loral in 1972 and was named president and chief operating officer in 1981. Along the way, he was instrumental in growing the company from modest origins to a $7 billion giant.

In 1997, as he approached traditional retirement age, Lanza convinced his new employer, Lockheed Chairman Norman R. Augustine, to spin off ten former Loral companies to form L-3 Communications. ("It took me less than half an hour to get a yes," Lanza later told Business Week.) Lanza finally got a chance to be CEO, and numbers whiz LaPenta was named president and chief financial officer.

The ten businesses spun off had annual revenues of $650 million and 4,900 employees.

Lockheed Martin received $503.8 million for selling 65 percent of its ownership in the ten companies. After the sale, a limited partnership led by Lehman Brothers owned half of L-3; Lockheed Martin retained a 35 percent interest and a management group accounted for another 15 percent. Lockheed agreed to invest $43.75 million in L-3, Lehman invested $62.5 million, and the management group provided $43.75 million. Another $375 million was financed with bank debt and high-yield bonds. The name of the new company came from Lanza, LaPenta, and Lehman Brothers.

L-3's first year revenues were $701 million. Plans for a $100 million initial public offering (IPO) were announced in February 1998. The IPO at $22 a share came on May 19; in the next six months the company's share price would rise to $46 a share, helped by strong earnings.

Lanza's acquisition strategy was to buy technology leaders, either struggling independent companies or black sheep divisions of major defense contractors, observed Business Week. Lanza focused on small to medium sized companies to avoid costly takeover battles with aerospace giants.

By November 1998, L-3 had already acquired seven companies. L-3 posted after-tax profits of $32 million on revenues of $1 billion in 1998. An additional stock offering was announced in early 1999, intending to raise $136 million to pay down debt and fund further acquisitions.

When Institutional Investor asked Lanza L-3's next move in November 2000, he quipped, "We're gonna go buy Lockheed." L-3's impressive growth made this a less than outrageous prospect. The company's share price reached $80 by the end of the year. A new stock offering announced in April 2001 was to raise $350 million.

In the spring of 2001, Lanza announced that he was changing his acquisition strategy to buy larger companies in a bid to become "the Home Depot of the defense industry." He aimed for L-3 to have revenues of $6 or $7 billion within the next several years--a stretch for what was then a $2 billion company, but not a laughable one, especially given Lanza's reputation.

At the 2001 Paris Air Show, Lanza told www.AviationNow .com that L-3 was a catalog company. It was more efficient, he said, to approach the handful of major aerospace companies with a vast array of products, than to try to vie for their business as a small, $100 million supplier. L-3 also boasted considerable financial resources and R&D capabilities and offered administrative efficiencies to the companies it acquired.
From 1996 sale of almost entire Loral (except Space) to Lockheed's spinoff of them in 1997 and 1998 IPO - awfully quick, and it seems like it was Bernie's loss and everybody else's gain, but I don't know all details of the sale.

There is an interesting detail in very good 2003 BusinessWeek article L-3's dealmaking has won admirers but also raised eyebrows :

... Schwartz, Lanza's former boss and an L-3 investor (he declines to disclose his stake) ...

Now, this was possibly, a part of the deal that he made when he sold to Lockheed (though I am not sure how that could be separated, unless L-3 IPO was as part of Lockheed stock) and he didn't have to disclose his ownership stake on SEC forms and filings unless he owned 5% or more of L-3 stock which would be very doubtful. I don't know if he still owns L-3 stock, and don't know or think that it would be illegal if he does.

Lanza died in June of 2006, his death was "sudden and unexpected", one day after his vist to the doctor who "determined that he was proceeding satisfactorily in his recovery" from two-month old surgery.

Re Hsu, have a question for you because of your locale.

Is it difficult to find out when and where Hsu registered this company as a business in the state of New York? The reason for this is simple - if it’s a fresh new company (not even a corporation) with little track record, then most likely nobody in their right mind would even think to invest millions in it, and thus it’s been set up deliberately for express purpose of laundering money.

I found at least 2 different addresses for Hsu’s “Components Ltd” (aka “Next Components Ltd”, aka “Components Limited”, aka “Because Components”, aka “Consultants Ltd”, aka “Because Men’s”), but both with the same phone number - (212) 221-6969:
Components Ltd, 1411 Broadway, New York, NY, 10012
Components Ltd, 561 7th Ave., New York, NY, 10012

This phone number also belongs (or previously belonged) to :
James Stone Limited Holding, 110 West 40th Street, New York, NY 10018 ... Interestingly, Hsu’s “Because Men’s” is also located in 10018 ZIP, but that’s all I could find, so don’t know if it’s the same business.

From Hsu campaign donation records at http://www.newsmeat.com/fec/bystate_detail.php?last=Hsu&first=Norman -
first reference to “Components Ltd” show only that it started on October 22, 2004 ($2000 to Barack Obama for Senate), but used a different ZIP code then - 10016, and continued until June 28, 2007 (shortly before the “trouble” started).

Just did a search on the New York Department of State Division of Corporations web site and they list the following corporations with Components Ltd. in their names.

Entity Name

#1 COMPONENTS INTERNATIONAL LTD.
88 COMPONENTS LTD.
ALWAY ELECTRONIC COMPONENTS LTD.
AVIATION COMPONENTS SERVICE LTD.
B & K COMPONENTS, LTD.
BELT COMPONENTS, LTD.
BLUESTAR INTERNATIONAL COMPONENTS LTD.
C.M. SECURITY COMPONENTS U.S. LTD.
CITITECH COMPONENTS, LTD.
COAST COMPONENTS, LTD.
COMPONENTS CLOTHING LTD.
COMPONENTS FOR INDUSTRY, LTD.
COMPONENTS, LTD.
COMPREHENSIVE COMPONENTS INDUSTRIES LTD.
DART COMPONENTS LTD.
ELECTRIC VEHICLE COMPONENTS, LTD.
HUNT COUNTRY COMPONENTS LTD.
ITALIAN COMPONENTS, LTD.
KING COMPONENTS EAST LTD.
KING COMPONENTS LTD.
MODERN ASSEMBLY COMPONENTS, LTD.
NEXT COMPONENTS, LTD.
ONECO COMPONENTS LTD.
OXFORD MICROWAVE COMPONENTS, LTD.
P.C. COMPONENTS, LTD.
PC COMPONENTS EUROPE, LTD.
SATELLITE COMPONENTS LTD.
SATELLITE COMPONENTS LTD.
SUFFOLK NATIONAL COMPONENTS, LTD.
SUPREME LIGHTING COMPONENTS, LTD.
TENCO COMPONENTS LTD.
THETA LAMBDA COMPONENTS & ELECTRONICS, LTD.
TIME COMPONENTS LTD.
TRI-STATE POWER COMPONENTS, LTD.
TWOCO COMPONENTS LTD.
VIRGIN COMPONENTS, LTD.

Their is no 'Components Ltd.'. There is a 'Components, Ltd.' but it was registered in May 1997 and is inactive. Quite frankly, it would be difficult to establish and protect a business name of just 'Components Ltd.' because so many other corporations use Components Ltd. and just add a word in front of that phrase (ie - King Components Ltd.). You would have difficulty trying to trademark the name and any company doing the same type of business with a similar name could claim trademark infringement. Now these are corporations and the Ltd. implies Limited Liability. The State of New York may have a different data base for Limited Liabities that are not corporations. Here is the information for Next Components, LTD. which you listed as one of his claimed business names ?

Selected Entity Name: NEXT COMPONENTS, LTD.

Selected Entity Status Information Current Entity Name: NEXT COMPONENTS, LTD.
Initial DOS Filing Date: MAY 06, 2005
County: NEW YORK
Jurisdiction: NEW YORK
Entity Type: DOMESTIC BUSINESS CORPORATION
Current Entity Status: ACTIVE

Selected Entity Address Information DOS Process (Address to which DOS will mail process if accepted on behalf of the entity)
NEXT COMPONENTS, LTD.
561 SEVENTH AVE, STE 1301
NEW YORK, NEW YORK, 10018
Registered Agent
NONE

Thanks for the link. It’s a bit finicky about commas, I see. Limited or Ltd in UK means the same thing that Inc. or Corp. here, but in most states (that I know of) it is generally meaningless but usually implies either LLC or LLP but not a corporation.

Nonetheless, at a glance, it seems that most of donations recorded are from non-existent (non-registered) company or companies having similar names to “Next Components Ltd” which was registered in 2005 (donations from “Components Ltd” started with Obama in 2004). Also, even ZIP code for existing company in the donation records is wrong - it shows 10012 instead of 10018.

Now, a guy with a degree in business from Wharton should know how to register a company if he is serious about either doing business or even doing a serious swindle. That it has not been done implies that it was nothing more than a name of company on business card and couldn’t possibly be used to catch serious investors in whatever endeavor he wanted to undertake, let alone people who had been entrepreneurs and had their own investment vehicles.

And someone of that caliber “invested” millions of dollars in a company he should have been able to check out better than couple of guys / girls / puppies in pajamas with computer keyboards did in a few hours (Internet never sleeps!). Hmmm!

The fact that he used the comma is relevant.

:-) Yes, and likely not an accident but deliberate, with intent to make a DBA / sole proprietorship (if that's even what that was) look like either a foreign corporation or at least a LLC. Practically all these "companies" have 'Ltd' or 'Limited' in them - I can't see this as just a coincidence. Also, "Components Ltd" as a company name sounds very nondescript and can be used for almost any type of business (like high tech, especially in California's Silicon Valley or Orange County), which is probably how and why it was chosen.

Limited Liabilities and Corporations are registered with the state. At least that is to the best of my knowledge. That New York State database linked above is for Corporations.

I saw Corporations and LLCs and LLPs there. Also, Hsu's "companies" seem to have a "traveling" or "flexible" ZIP code when used in donations (according to donations records). But all of them seem to be Manhattan ZIPs, so any Fictitious Name Filing for dba should be found in papers around that county that specialize in these ads (within 10 years, I believe, in most states, but may differ by states) .

"Next Components, Ltd" phone and address is not "listed" as "in the book" but according to NY DOS it has the same address that I found for "Components Ltd" which is also "listed" at another address with the same phone number, and was "formed" earlier according to FEC donations records. "Chaotic life style to say the least" and "our eyes just glaze over the complexity" may become a mantra if they want Hsu to become the only scapegoat and prevent from spreading looking at Hsu's "gullible investors" and other "victims".

It is very easy to buy a corporate name (shell company) from someone who had registered the name and is no longer using it.

Exactly, it is very easy and should not be all that expensive, so why not do it and establish a "legitimate" corporation[s] (not dba) to protect himself if he wanted to either get a legitimate business (especially import / export with China, as alleged by Rosenman) or a swindle? How would one expect to hook a "whale" to invest big money into a China import-export business without even "on paper" real company with business address? Even with a business representative, it's never done. It's only needed for one real purpose - to establish a business checking account, transactions in which hopefully are being thoroughly examined. DBAs also have to pay city annual business license renewal fees and/or taxes and state quarterly sales taxes (if any, but at least forms have to be filed).

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